Quick Pay vs. Factoring: How Carriers Get Paid Faster
Quick pay is a broker paying your invoice early, usually for a fee. Factoring is selling your invoices to a third party for cash now. Here's how each works, what each costs, and how to choose.
Quick pay is a broker paying your invoice in a few days instead of a few weeks, usually for a percentage fee. Factoring is selling your invoices to a factoring company, which pays you most of the amount right away and collects from the broker later. The third option is standard net terms, where you wait for the broker to pay in full.
All three get you the same invoice amount, less a different cost, on a different day.
The three options
| Standard net terms | Quick pay | Factoring | |
|---|---|---|---|
| Who pays you | The broker | The broker | The factoring company |
| When | Commonly 30 days after a complete invoice | Within a few days | Usually within a day or two |
| Cost | None | A percentage of that invoice | A percentage of each invoice, plus any account fees |
| Commitment | None | None, chosen load by load | A contract, often with a term and a minimum |
| Who collects from the broker | You | Nobody, the broker has paid | The factor |
Standard net terms
You deliver, send the invoice with the signed bill of lading, and the broker pays after a set number of days. Net 30 is the most common. The count starts when the broker has a complete, correct invoice, not on the delivery date.
There is no fee. The cost is that you pay for fuel, insurance and wages for a month before the load pays you back.
Quick pay
The broker pays early in return for a discount on the invoice. You choose it load by load. There is no contract and no third party.
The cost is easy to calculate. Multiply the invoice by the fee.
| Invoice | Quick pay fee | Fee in dollars | You receive |
|---|---|---|---|
| $2,000 | 2% | $40 | $1,960 |
| $2,000 | 3% | $60 | $1,940 |
| $2,000 | 5% | $100 | $1,900 |
The percentages are examples. Each broker sets its own fee and its own timing, and both are written in the broker-carrier agreement or on the rate confirmation.
Factoring
You sell your invoices to a factoring company. The factor pays you an advance, which is most of the invoice, soon after you submit the paperwork. It then collects the full amount from the broker. Its fee comes out of the difference.
Factoring is a contract, and the terms matter more than the headline rate.
Recourse and non-recourse
- Recourse. If the broker does not pay, you pay the factor back. The fee is lower.
- Non-recourse. The factor takes the loss if the broker does not pay because of insolvency. The fee is higher. Read the definition in the contract, because non-recourse usually does not cover a broker who disputes the invoice.
Terms to read before signing
| Term | What to look for |
|---|---|
| Rate | Flat per invoice, or rising the longer the broker takes to pay |
| Advance and reserve | How much you get up front, and when the held-back amount is released |
| Contract length | The term, and whether it renews automatically |
| Termination | The notice period and any fee for leaving early |
| Volume minimum | Whether you must factor a minimum amount each month |
| All invoices or selected | Whether you must factor every load, or can choose |
| Other fees | Charges for transfers, setup, credit checks or fuel advances |
A factor also checks the credit of the brokers you haul for. That is useful information. If your factor will not buy invoices from a broker, find out why before you take the load.
How to choose
| Your situation | Option that usually fits |
|---|---|
| You have cash reserves to cover a month of costs | Net terms |
| Cash is tight on some loads, not all | Quick pay, on the loads where timing matters |
| You are growing, reserves are thin, you need cash after every load | Factoring |
| The broker pays fast at no charge | Take it, and use nothing else on that load |
Compare the cost over a month, not per load. A few percent on every invoice adds up to a real share of your margin.
Paperwork decides when you are paid
Every option starts from a complete invoice. A payment cannot be released against missing paperwork.
- Signed bill of lading. The receiver's signature, legible, with the date. See what goes on a bill of lading.
- Rate confirmation. The invoice total should match it.
- Receipts. Lumper receipts and anything else you are billing.
- Accessorial proof. In and out times for detention. See detention pay and accessorial charges.
- Send it the day you deliver.
Make sure your W-9 and payment details are on file before your first load with a broker. The carrier packet checklist covers setup.
How we pay carriers
Lancashire Freight pays by same-day ACH on proofs of delivery submitted by 2pm, at no extra cost. Standard pay otherwise runs net-21 from invoice. You can use a factoring company if you choose to. Send the notice of assignment with your carrier packet.
FAQ
What is quick pay in trucking?
Quick pay is a broker paying a carrier's invoice within a few days instead of on standard terms, usually in return for a percentage fee deducted from the invoice. The carrier chooses it load by load.
What is freight factoring?
Freight factoring is selling your invoices to a factoring company. The factor pays you most of the invoice amount soon after delivery, collects the full amount from the broker, and keeps a fee.
What is the difference between quick pay and factoring?
Quick pay comes from the broker, is chosen per load, and has no contract. Factoring comes from a third party under a contract that usually covers many or all of your invoices.
What is the difference between recourse and non-recourse factoring?
With recourse factoring you must repay the factor if the broker does not pay. With non-recourse factoring the factor takes the loss in the cases the contract defines, usually the broker's insolvency, in return for a higher fee.
What does net 30 mean in trucking?
Net 30 means the broker pays the invoice 30 days after receiving it. The count starts when the broker has a complete and correct invoice with the required paperwork.
How fast do freight brokers pay carriers?
It depends on the broker. Standard terms are commonly around 30 days. Lancashire Freight pays the same day by ACH on proofs of delivery submitted by 2pm, and net-21 otherwise.
Does factoring cost more than quick pay?
It depends on the fees and on how many loads you use each for. Factoring fees apply to every invoice you factor and the contract may carry other charges, while quick pay is paid only on the loads you choose.
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